As India slowly embraces cashless transactions due to the result of the recent demonetisation drive by the government, people have been hesitant to adopt digital means of dealing with their finances. While making online transactions by using a Debit Card or Credit Card offers a certain amount of convenience and comfort, it definitely has a few disadvantages too.
In a bid to encourage a wider adoption of digital payments and to promote a cashless economy, the government has announced a plethora of discounts and other benefits to the common man.
Additional Reading: Going Cashless – The Future Of Money
Here’s all you need to know about adopting a cashless approach to finances and also lay down the advantages and disadvantages of going digital with money.
Going Cashless: Why it is a good idea
Going digital makes financial transactions easier for you. Say goodbye to carrying cumbersome bundles of cash or worrying about getting change for that Rs. 2,000 currency note. The only thing you’ll probably need is your Credit Card just in case you’re in need of some financial backup. With digital wallets, everything you need is on your phone!
Digital payments are also much easier to handle when you are travelling. However, not every section of society will be able to use digital payments technology because of a lack of knowledge on the use of this method of making payments. The need of the hour is to ensure total inclusion so that people from all walks of life have equal opportunity to experience the convenience of a cashless economy.
Digital payments will be a great advantage especially in times of an emergency. For instance, while making payments at hospitals. You wouldn’t want to be fretting over running to an ATM at a time when you need medical assistance.
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The government has announced a service tax waiver on card-based transactions up to a limit of Rs. 2,000. There’s more! For instance, you can get a discount of 0.75% when paying for fuel digitally.
You can also cash in on benefits when you book rail tickets, pay highway toll, or purchase Insurance through digital means.
This is in addition to the cashback offers and discounts offered by various mobile wallets. Along with the reward points and loyalty benefits you receive through Credit Cards and store cards, you could certainly save a fair amount of money over time.
Tracking your expenses
Going digital and making payments through Credit Cards or Debit Cards and mobile wallets can help make all financial transactions transparent. This will make it much easier for you to keep a track of your spending habits.
Learn to budget
Going digital also makes it easier for you to review your budget periodically. There are several mobile apps and tools that will help you analyse your spending habits and keep track of your finances.
Additional Reading: 5 Ways To Manage Your Money Through Apps
When your spending is in control, you may be motivated to build wealth by making more Investments.
Making cashless payments for your purchases will allow you to cut back on those small, unnecessary expenses like the Rs. 20 you spent on a packet of chips because you were short on loose change or currency notes of smaller denominations.
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Now you have no reason to break into a sweat about your wallet going missing. If lost, a Credit Card or mobile wallet can easily be blocked to prevent unauthorised persons using them. However, there is one limitation. If the mobile wallet has been used by an unauthorised person before it was blocked, it is not possible to retrieve the money spent.
How you can benefit from going digital
Service tax: Get a 15% service tax waiver on digital transactions up to a limit of Rs. 2,000.
Fuel: Get a discount of 0.75% on digital purchase of fuel through Credit /Debit Cards, e-wallets or mobile wallets.
Here are a few Fuel Credit Cards you might want to get your hands on.
SBI Simply Save Card
With a first year fee of Rs. 499, use the SBI Simply Save card to fill fuel and get a 2.5% fuel surcharge waiver for each transaction between Rs. 500 and Rs. 3,000.
Kotak Bank Royale Signature Credit Card
A lifetime free card that is high on rewards. Get a 2.5% fuel surcharge waiver across petrol pumps in India. Save 1.8% railway surcharge waiver for transactions on www.irctc.co.in and 2.5% for transactions on Indian Railways Booking Counters.
American Express Platinum Travel Credit Card
This card is high on privileges and is free for the first year. Get 3% cashback at leading fuel stations across India and a 2.5%* surcharge waiver at HPCL fuel stations.
HDFC Regalia First Credit Card
With a first year fee of Rs. 1,000, this card is high on rewards. Save upto Rs. 500 per month on fuel spends basis fuel surcharge waiver.
Railway tickets: You can get a 0.5% discount on monthly and seasonal suburban railway tickets booked from 1st January 2017. Those who buy railway tickets online can get up to Rs. 10 lakh free accident insurance too.
Additional Reading: Travel Insurance For Train Travellers: Full Steam Ahead
Railways catering: Enjoy a 5% discount on digital payments for railway catering, accommodation, retiring rooms, and more.
Highway toll: Get a 10% discount on National Highways toll payment through RFID or fast-tags in 2016-17.
Insurance: You can also get 10% discount from government general insurers on premium paid online via their web portals. An 8% discount on new LIC policies bought online via its website.
POS: Rs. 100 per month is the maximum rent that PSU banks can charge for PoS terminals.
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Going Cashless: The drawbacks
Possibility of identity theft
Many people are hesitant to adopt a cashless approach to dealing with finances because of the possibility of identity theft. There is also the risk of online fraud that deters people from going completely cashless.
The recent move by the government to do away with two-factor authentication for any online transactions up to a limit of Rs. 2,000 could make people more wary of fraud and identity theft.
Difficult for those who are not tech-savvy
A large percentage of Indian consumers are not internet-savvy. The fact that India has low internet penetration is the primary reason for the lacklustre response that the idea of going cashless has received.
Also, digital payments will be a challenge for older people because they will most likely not be aware of how to use a mobile wallet or a Credit / Debit Card.
You can’t deny that you tend to feel more generous with money when it isn’t in physical form. For this very reason, if you have trouble sticking to a budget, going cashless may not be such a good idea.
Using cash for all your financial transactions may be a difficult habit to snap out of. But, while it has several advantages, a completely cashless economy is only possible with the spread of awareness among all sections of the population.